The History of Microfinance in China

The United Nations is the first international organization that introduced microfinance into China. Since the 1980’s, UNIFEM, IFAD, UNFPA have included financing contents in their poverty alleviation or agriculture developing projects in China. Later, international NGOs like the Worldvision, Hong Kong Oxfam also included financing contents in their poverty alleviation and community development projects towards poor people.
In 1993, Institute of Rural Development of CASS firstly introduced the Bangladesh Grameen Bank, an international standardized microfinance model, into China and created “Funding Poor Cooperatives (FPC)”. Microfinance projects launched then in 6 counties with various donations and low interest loans as the lending fund. “Microfinance” became a terminology and a special poverty alleviation method to be experimented and distributed in China.
Since 1995, UNDP/CICETE microfinance poverty alleviation projects have been carried out in 48 counties and cities in China’s 17 provinces. Later an urban microfinance for laid-off workers was carried out in Tian Jin Municipality and some cities in He Nan province. The project was following the Grameen Bank style, but the organizational structure was through specially founded Rural Development Associations by local governments.
In 1995, the Australian funded China Qinghai Community Development project also started microfinance. The project was mainly carried out by the Agriculture Bank of Hai Dong region with an operational capital of 14 million RMB. In June of the same year, the World Bank CGAP was founded and was driving the global microfinance industry into a new era. Microfinance hence became internationalized and standardized.
In the 1990’s, other organizations like UNICEF、UNFPA、UNWFP，CIDA, Government of Germany, Government of Holland、Ford Foundation、Worldvision、Oxfam、Word Bank Poverty Alleviation Project also implemented microfinance projects within China.
In 1997, the government of China summed up the experiences learned in the microfinance pilot projects and started in 1998 to distribute to wider scope a government-oriented microfinance project. Before 1999, microfinance was mainly a poverty alleviation discount loan subsidized by the central treasury and distributed via the FPC who is an agent of Agriculture Development Bank (and later transferred to the Agriculture Bank). From 1999 this was changed and the loan was distributed to the farmers directly from the Agriculture Bank. However, the microfinance business later shrank in great scale. It was violent ups and downs from mass distribution to mass shrinking of business.
At the end of 1999, Rural Credit Cooperatives (RCC) also started the promotion of microfinance. Their fund source is the relending fund from PBC with preferential interest rate offered by the PBC.
Microfinance in China has developed for 10 years yet by far it is still in the experiment and exploration stage, or the primary stage for microfinance development. It is mainly a productive loan service for people living with low income.
At the time being China’s banking and non-banking institutions that are engaged in microfinance include: CASS Rural Development Institute, CICETE, Women Developing Department of the National Women Federation, China Poverty Alleviation Foundation, Amity Foundation, Handicapped Federation, Ministry of Science and Technology, the Agriculture Bank, Rural Credit Cooperatives. Besides, there are international organizations like UNDP, UNICEF, UNFPA, International Agriculture Development Foundation, World Food Plan, World Bank, Asian Bank, Ford Foundation, Hong Kong Oxfam, Worldvision and other bilateral aiding projects with Canada, Australia, Japan and Germany.
In order to further drive the development of microfinance in China, CICETE, Rural Development Institute OF CASS and the Women Developing Department of the ACWF jointly proposed to create “China Association of Microfinance” in 2004 and this proposal received positive response and supports from many authorities and units.
In order to prompt the millennium development objective, the United Nations name the year of 2005 the International Year of Microcredit.

Preparatory Team, CAM